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In [1] Zawadoski introduces a banking network model in which the asset and counter-party risks are treated separately and the banks hedge their assets risks by appropriate OTC contracts. In his model, each bank has only two counter-party…
In regulatory proceedings, few issues are more hotly debated than the cost of capital. This article formalises the theoretical foundation of cost of capital estimation for regulatory purposes. Several common regulatory practices lack a…
In this paper, we study dependence uncertainty and the resulting effects on tail risk measures, which play a fundamental role in modern risk management. We introduce the notion of a regular dependence measure, defined on multi-marginal…
Systemic liquidity risk, defined by the IMF as "the risk of simultaneous liquidity difficulties at multiple financial institutions", is a key topic in macroprudential policy and financial stress analysis. Specialized models to simulate…
We consider a structural credit model for a large portfolio of credit risky assets where the correlation is due to a market factor. By considering the large portfolio limit of this system we show the existence of a density process for the…
In this paper we consider a compound Poisson risk model with regularly varying claim sizes. For this model in [1] an asymptotic formula for the finite time ruin probability is provided when the time is scaled by the mean excess function. In…
In this paper, an optimization problem with uncertain constraint coefficients is considered. Possibility theory is used to model the uncertainty. Namely, a joint possibility distribution in constraint coefficient realizations, called…
We study the problem of a decision maker who must provide the best possible treatment recommendation based on an experiment. The desirability of the outcome distribution resulting from the policy recommendation is measured through a…
Covered bonds are a specific example of senior secured debt. If the issuer of the bonds defaults the proceeds of the assets in the cover pool are used for their debt service. If in this situation the cover pool proceeds do not suffice for…
Under the Basel II standards, the Operational Risk (OpRisk) advanced measurement approach is not prescriptive regarding the class of statistical model utilised to undertake capital estimation. It has however become well accepted to utlise a…
This article develops the theory of risk budgeting portfolios, when we would like to impose weight constraints. It appears that the mathematical problem is more complex than the traditional risk budgeting problem. The formulation of the…
We propose a distributionally robust formulation of the traditional risk parity portfolio optimization problem. Distributional robustness is introduced by targeting the discrete probabilities attached to each observation used during…
In risk theory, financial asset returns often follow heavy-tailed distributions. Investors and risk managers used to compare risk measures as the value at risk or tail value at risk in order over the whole confidence levels to avoid the…
In this paper we develop a novel methodology for estimation of risk capital allocation. The methodology is rooted in the theory of risk measures. We work within a general, but tractable class of law-invariant coherent risk measures, with a…
Balancing safety and efficiency when planning in crowded scenarios with uncertain dynamics is challenging where it is imperative to accomplish the robot's mission without incurring any safety violations. Typically, chance constraints are…
The contribution of this paper is to introduce change of measure based techniques for the rare-event analysis of heavy-tailed stochastic processes. Our changes-of-measure are parameterized by a family of distributions admitting a mixture…
In general, underestimation of risk is something which should be avoided as far as possible. Especially in financial asset management, equity risk is typically characterized by the measure of portfolio variance, or indirectly by quantities…
Distributionally robust control is a well-studied framework for optimal decision making under uncertainty, with the objective of minimizing an expected cost function over control actions, assuming the most adverse probability distribution…
We address the statistical estimation of composite functionals which may be nonlinear in the probability measure. Our study is motivated by the need to estimate coherent measures of risk, which become increasingly popular in finance,…
Parametric insurance has emerged as a practical way to cover risks that may be difficult to assess. By introducing a parameter that triggers compensation and allows the insurer to determine a payment without estimating the actual loss,…